4 Goods, Services, and ConsumersFree products – plentiful, no one owns them, no price is attachedExamples?Air, sunshineNot scarce enough to be an economic concernEconomists are concerned with economic products – goods and services that are:UsefulRelatively scarceTransferable to others

5 Goods, Services, and ConsumersGoods – tangible commodities like books, cars, CDsconsumer good: intended for final use by the individualExamples?Food, shoes, dishwasher, carcapital good: a manufactured good used to produce other goodsRobotic arm, bakery oven, computerdurable good: any good that lasts 3 years or more when it is used on a regular basis (examples?)nondurable good: item that lasts for less that 3 years when it is used on a regular basis (food, most clothing items, writing paper)

6 Goods, Services, and ConsumersSERVICE – work that is performed for someoneWho is in the service industry?Teachers, lawyers, doctors, Snoop Doggy DogCONSUMERS – people who use goods and services to satisfy wants and needsConsumption: the process of using up goods and services in order to satisfy wants and needsConspicuous consumption: the use of a good or service to impress othersExamples?Diamonds, fancy cars

7 VALUE, UTILITY, and WEALTHValue – something that has worth that can be expressed in dollars and cents.Is determined by the price someone would pay for the itemEx: accordionParadox of Value – “diamond-water” paradoxSomething of value must also have Utility – the capacity to be useful to someone.Utility may vary from one person to the next.Examples?So…………….for something to have value it must be scarce and have utility.

8 VALUE, UTILITY, and WEALTHWealth – the sum of those economic products that are tangible, scarce, useful, and transferable from one person to another.

9 PRODUCTIVITYProduction – process of creating goods/ services (when the factors of production are present) examples?Productivity – efficient use of productive resourcesincreases when more output is produced with the same or fewer inputsusually discussed in terms of labor, but ALL factors of production are includedBusinesses buy efficient capital goods.Farmers buy fertile lands.Increases also occur with…………….

10 Division of Labor – when workers perform fewer tasks more frequentlySpecialization – productive inputs do whatever task they are able to do bestDivision of Labor – when workers perform fewer tasks more frequentlyPeopleRobotsStates (Iowa = corn)Countries (Saudi Arabia = ?)Productivity increases when firms invest in Human Capital – sum of skills, abilities, health, and motivation of people.Why do you want your employees to be happy? Healthy? Provided for?

11 Let’s have some fun!Imagine that you are managers of the STRAIGHT AND TRUE PAPER AIRPLANE CO.Describe what makes your paper airplanes so great. What are your airplane construction procedures? What steps need to be taken for a one-man operation?Now consider this: How could each airplane be made if it were constructed by 5 people who specialize in the various steps?Which is more efficient? Why?

12 ECONOMIC INTERDEPENDENCEDef: actions in one part of the country or world have an economic impact on what happens elsewhere.WeatherScarcity (oil)Market – a location or other mechanism that allows buyers and sellers to deal readily in a certain economic product.LocalRegionalNationalglobal

13 Individuals earn money in factor markets – markets where productive resources are bought and soldWhen individuals receive money, they spend it in product markets – markets where producers offer goods and services for saleThis is all part of a Free Enterprise Economy – one in which consumers and privately owned businesses make the decisions of WHAT, HOW, and FOR WHOM to produce.